In: Operations Management
Suppose a seller in Panama sells a container of bananas to a buyer in the New Orleans under a CIF contract. Immediately after the bananas were loaded on board the ship in Panama, a labor strike prevented the vessel from sailing on time. As a result, the bananas were rotten when they arrived in New Orleans. The buyer sued for the value of the shipment. Will the seller be liable? Would it matter if the seller knew that a labor strike was likely?
In such a case, the buyer can deny the acceptance of the shipment and the seller will be bound to send him new shipment with same order. The buyer can’t hold the seller liable for the damage caused due to strike and ask for compensatory fine or sue the seller for this. However, if the seller had knowledge about the occurrence of strike and still he did not intimidate the buyer about delay in order delivery, the seller can be held accountable for the damages to the buyer, caused due to the shipment delay. In this case, the buyer has to prove that seller had prior knowledge about the probability of occurrence of the strike.